City of Providence, Rhode Island, et al. v. BATS Global Markets Inc. et al.


The judge granted summary judgment for our clients, citing Professor Hendershott’s expert reports throughout his opinion.

Retained by the Joint Defense Group Representing the Exchanges

In this alleged market manipulation class action, plaintiffs claimed that seven stock exchanges misled them about certain investment products and services sold to high-frequency trading (HFT) firms. Similar allegations have been popularized by books such as Flash Boys by Michael Lewis. Counsel for the joint defense retained Cornerstone Research to support Terrence Hendershott of the University of California, Berkeley, to evaluate the proposed theories of liability and alleged mechanisms of harm.

“This gap between [the plaintiffs’ expert’s] methods and conclusions is fatal to Plaintiffs’ arguments for admissibility.”

Professor Hendershott identified flaws in the plaintiffs’ methodology used to determine membership in the proposed class. Specifically, he opined that the plaintiffs’ class definition was arbitrary and did not correspond to their theories of liability and harm. He also demonstrated that individualized inquiry would be necessary to understand the extent of the putative class members’ knowledge of how HFT firms could use the products and services at issue.

Counsel for the joint defense also retained Cornerstone Research to support Arnold Barnett of the Massachusetts Institute of Technology. Professor Barnett found that the plaintiffs’ damages methodology was greatly limited from a statistical perspective and was not a reliable way to calculate alleged harm.

A judge for the U.S. District Court for the Southern District of New York granted summary judgment for the defendants. Citing Professor Hendershott’s expert reports throughout his opinion, the judge also granted the defendants’ motion to exclude testimony from the opposing expert.

Data Science Center Analyzes Trading Data

The Data Science Center determined the best protocol to access the over 200 TB of high-frequency trading data that were provided, and also helped identify the relevant data subsets that would be used in the analyses.

Under the direction of the testifying expert, the team helped develop complex code that relied on the understanding of these large databases in order to conduct multiple analyses.

For more information, contact Katie Galley, Stewart Mayhew, or Pierrick Morel.

Case Experts

Terrence Hendershott

Professor and Willis H. Booth Chair in Banking and Finance,
Haas School of Business,
University of California, Berkeley

Arnold I. Barnett

George Eastman Professor of Management Science,
Professor of Statistics,
MIT Sloan School of Management,
Massachusetts Institute of Technology